Cash is King: Don't finance the cash flow of your customers! | Cuustomer
11/20/2019Alessandro Drappa
  • #Cash flow
  • #Invoices

Cash is King: Don't finance the cash flow of your customers!

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Article by
Alessandro Drappa - Founder @ Recovr

Alessandro graduated from the Solvay Business School and the National University of Singapore with a minor in Technology and Business, and is committed to helping SMEs get the most out of the digital world. It was for this purpose that he continued his education by encoding bootcamp Le Wagon, where he coded the first prototype of Recovr.

Like more than 90% of companies, you are likely to face unpaid or late payments, but did you know that they are the main reason for more than a third of bankruptcies?

Unpaid invoices: a scourge for entrepreneurs

In Belgium, 45% of invoices are paid late and about 1% of invoices are never recovered.

Result?

In theory, the allotted payment term is 25 days, but in practice the payment term is more than 48 days. Moreover, SMEs generally need at least 15 days to respond to payment delays. The costs for businesses are difficult to estimate, but would amount to about 2% of the annual turnover. It may not seem like much, but if you know that the profit margin is on average 3.5%, it can make a big difference.

For what reasons?

In most cases, the reason given is clearly the lack of resources, but in practice it turns out that many companies are in fact simply looking for financing at the expense of their suppliers. The ones who lose are the ones who let themselves be seized.

The Theory

Legally, the payment term should be 30 days, but you are free to set a different term in your terms of sale.

What can be done in practice?

First of all, it is important to have good conditions. These regulate the relationship with your customer and minimize disputes, which is often one of the reasons for delays. When issuing an invoice, make sure that all information is correct and sent to the right person, if possible by e-mail in electronic format. In case of delay, respond immediately. Proactivity is the key to a proactive attitude I'm afraid to damage the relationship with my client... The solution is to automate your recall procedure, this makes it less personal and gives back the guilt.

What is the IOS procedure?

This is a procedure that was recently introduced in Belgium and makes it possible to recover your uncontested claims. This procedure enables you to have your uncontested B2B invoices paid quickly.

Take the test

Do the exercise, take your final check. Take your trade receivables item, divide it by your turnover and multiply it by 360. You will get your average payment time from your customers. So, is it in accordance with the deadline you set? Maybe it's time to respond.

Latest Advice

Cash is King. The money that sleeps with your customers is money you can't invest. So be proactive and give yourself the means to realise your ambitions.

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